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PAL restructures equity ahead of investor’s entry

PAL Holdings Inc. is implementing an equity restructuring to wipe out its existing deficit and a new one that will be booked after the acquisition of Zuma Holdings Management Inc. and subsidiary Air Philippines Inc.

The parent company of Philippine Airlines announced the equity restructuring ahead of the expected entry of a strategic investor this year. The investor is expected to acquire up to 40 percent of the flag carrier.

PAL Holdings, which controls both Philippine Airlines and PAL Express, said in a disclosure to the stock exchange its board approved the reduction of its authorized capital stock from P30 billion, divided into 30 billion common shares with a par value of P1 to P18 billion divided into 30 billion common shares with a par value of P0.60 per share, without returning any portion of the capital to stockholders. 

“The resulting reduction surplus from the foregoing transaction shall thereupon be used by the corporation, together with its existing additional paid in capital and the additional paid-in capital to be booked upon the completion of the acquisition of Zuma to wipe out its projected deficit as of 30 April 2017 [tentatively], on a consolidated basis,” PAL Holdings said.

Zuma owns 99.97 percent of Air Philippines Corp., operator of PAL Express.

The board of Philippine Airlines Inc. also approved a similar equity restructuring where PAL shall reduce its par value from P0.20 to P0.13 per share so that it can apply the resulting reduction surplus against its deficit as of December 2016. 

PAL shall decrease its authorized capital stock from P20 billion divided into 100 billion common shares with a par value of P0.20 per share to P13 billion divided into 100 billion common shares with a par value of P0.13, without returning any portion of the capital to stockholders. 

“The resulting reduction surplus from the foregoing transaction, together with its existing additional paid in capital, shall thereupon be used by PAL to wipe out its deficit as of 31 December 2016,” PAL Holdings said.

PAL said after the equity restructuring was approved by the Securities and Exchange Commission, it would increase its par value to P1.

PAL said it was expecting a new strategic investor within the first half of the year. PAL president Jaime Bautista did not disclose the identity of the strategic investor, but said it’s an “airline in the world.”

Bautista said PAL was expecting to sell up to 40 percent to the new investor.

The airline, now wholly-owned by tycoon Lucio Tan after he bought back a 49-percent stake that San Miguel Corp. purchased from him in 2012, posted a net income of P2.55 billion in January to September 2016, lower by 57 percent than a year ago.

Revenues increased 3.5 percent in the nine-month period to P85.35 billion, with passenger revenues rising 4.7 percent to P71.47 billion.

Topics: PAL Holdings Inc. , equity restructuring , Zuma Holdings Management Inc. , Air Philippines Inc.
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